Hawk v. Engelhart (In the Matter of Hawk)
Petition characterizes Fifth Circuit as standing alone by rejecting the ‘snapshot rule' for exemptions.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Consumer
- Case Status:
- Reversed and Remanded
- Citation:
- 16-20641 (5th Circuit, Sep 05,2017) Published
- Tag(s):
- Ruling:
- Distinguishing its prior ruling in In re Frost, the Fifth Circuit held that funds withdrawn from an otherwise exempt retirement account by a chapter 7 debtor after the petition date constituted a different property interest than the original retirement account and, therefore, did not thereafter become property of the chapter 7 estate. Based on the court's ruling, the same would not necessarily be true if the funds were withdrawn under similar circumstances by a chapter 13 debtor.
- Procedural context:
- The debtors appealed the bankruptcy court's order directing turnover of funds withdrawn during the chapter 7 case from their retirement account. The district court affirmed the bankruptcy court's ruling, and the debtors appealed.
- Facts:
- After filing for chapter 7 relief, debtors claimed an exemption for funds held in an individual retirement account (IRA). No party objected to the exemption. Thereafter, the debtors withdrew the entire balance from the IRA. Upon learning of the liquidated funds, the trustee demanded the debtors to turnover the funds; however, the funds had been used to pay for living expenses. During the same period, another creditor timely objected to the debtor's discharge. In reversing the order directing turnover the funds, the Fifth Circuit looked by analogy to its decisions in the homestead context, In re Zibman, 268 F.3d 298 (5th Cir. 2001 (chapter 7 case) and In re Frost, 744 F.3d 384 (5th Cir 2014) (chapter 13 case). Emphasizing that property interests acquired post petition by a chapter 7 debtor do not become property of the estate, the Fifth Circuit concluded that the withdrawal of funds from the IRA created a new property interest of the debtors in "amounts distributed from a retirement account" that was not property of the estate.
- Judge(s):
- Stewart, Wiener, and Prado
